Wednesday, September 6, 2023

#249 / The "Law" Of Supply And Demand

Readers of my blog postings may or may not have heard about a plan, pushed by land speculators and development interests, to turn huge areas of open space and farmland in Solano County into a "new city." 

Click this link to read a recent AP news story about what has been a "stealth" effort by "billionaires" to buy up land for this proposed project. The whole idea - great for the billionaire land speculators - would be fundamentally inconsistent with Solano County's current land use use policies.

An attorney friend of mine - who lives in Southern California - recently wrote me a note in which she made the following observation, with reference to the proposed Solano County development:

I thought the whole point of these housing density bills was to stop sprawl. I wonder if the governor is supportive of this project too? I'm sure these billionaires assume they can just roll the land use laws. This will be a test to see whether the legislature and the governor will finally put their money where there mouth is, so to speak.

My friend's comment references the fact that the Governor (and the State Legislature) have recently been undermining "local control" over land use. I mentioned that phenomenon in my blog posting last Monday, suggesting that an initiative petiton being circulated in the City of Santa Cruz would be an important way to bolster local control over future high-rise developments in the city, besides helping to ensure that developers produce more "affordable" housing units than state law would otherwise make them produce. 

The "housing density bills" my attorney friend mentions in her note to me are bills that mandate new density in existing cities, while depriving local elected officials (and local voters) of their ability to try to balance the demands for new development with other important objectives of good land use policy. For instance, preserving farmland and open space is important. So is dealing with issues like traffic, parking, neighborhood compatibility, water availability, etc., as new developments occur inside already existing urban areas. Recent state laws (those "housing density bills") constrict or remove the ability of local officials to make key land use decisions, as they attempt to establish the right balance.

I wrote back a response to the question posed by my friend. I suggested that the newest efforts at the state level to reduce local discretion over local land use questions is mainly driven by our state's very real, and very urgent, housisng crisis. Unfortunately, the proposed "solution" for this crisis - eliminating local land use discretion and mandating new high-rise and high-density developments - isn't actually effective in producing more "affordable housing." 

I have a theory why the state is going along with the developers, which I sent along to my attorney friend. She thought it was a pretty good explanation, so I decided I'd pass it along to those who read this blog. 

If the so-called "Law of Supply And Demand" were actually a "law," equivalent to the law of gravity or other such laws that describe the inevitable consequences of some action or condition, then maybe the state's preemption of local authority would make some sense. But there is no such operational "law," which is the point I made in the response I sent to my friend (I have also talked about this topic before): 

It is my opinion that the political efforts now underway to overturn and undermine local land use controls (to promote “affordable” and “infill” housing) have very little to do with the “smart growth” philosophy that many of us have supported - and that I, certainly, still support. "Smart growth" does require infill, and infill projects, clearly, are more difficult politically (and often economically) than “greenfield” projects that represent the typical “sprawl” style of development that “smart growth” is intended to counter. In fact, genuine “infill” development (as contemplated in the “smart growth” philosophy of future land use development) requires great attentiveness to the “neighbors” who will, inevitably, be impacted by new infill development. Allowing local governments to figure out how to accomplish politically challenging infill projects requires the exercise of lots of local discretion, because the parking, traffic, and utility issues are very real. 
In my opinion, the political basis upon which the YIMBY ["Yes" In My Backyard"] argument that the state should preempt local discretion is founded on the implicit claim that there is a reality to a posited “Law of Supply and Demand.” Proponents win the argument in favor of new, high-density development (both in the legislature and in the mind of the public) based on people’s belief that there really is a “Law” that insures that a reduction in housing prices will occur if the “supply” of housing is only increased. The argument that makes acceptable the erasure of rules intended to balance community concerns as development proceeds is based upon a genuine (though terribly mistaken) belief that if the “supply” of housing can be made to increase then the “price” of housing will fall.
The lack of affordable housing is a national, and state, and local crisis. So, to the degree that the supposed “Law of Supply and Demand” will provide a solution, as many believe it will, other important priorities can be disregarded. Of course, in the state legislature, the “pay to play” principle is also a major reason for our state legislators’ recent willingness to sell out the communities they represent for campaign dollars (and in some cases, probably, for personal dollars).
In fact, “demand” is not a constant, so increasing the “supply” doesn’t inevitably mean a decrease in price. The “demand” in my community, for instance, is functionally unlimited. If new housing units are made available in Santa Cruz County, there will be more than enough demand (coming from outside the community and generated by the possibility provided by the new supply) to “raise,” not lower, prices. That’s what is actually going on, but I have observed well-intentioned people say that while it’s “too bad” that local neighborhoods will be undermined by the developments being approved, on the basis of recently-enacted state laws, these outcomes are really alright, and necessary, since it is so important to produce affordable housing. 
Regrettably, the state legislature has not mandated universal inclusionary housing requirements (requirements that we instituted in Santa Cruz County in 1978), which might actually help address the lack of affordable housing. Instead, the legislature is backing the “supply and demand” theory that if we just let the developers build more units the price will go down. Ironically, some of the legislature’s newest efforts have actually undermined our local inclusionary housing ordinance, by giving out “density bonus” units to developers that are substituted for what would otherwise be inclusionary affordable units required by our local ordinance.
Anyway, this short rant, stimulated by your inquiry to me, is intended to encourage all of us to try to get local and state officials, and the public at large, to realize that MORE housing does not, absent very specific, and increased, affordable housing mandates, mean more “affordable” housing. Certainly in places like Santa Cruz, California, these new state law mandates for more, more, more - and for higher, higher, higher - have just the opposite effect. 

That's the analysis that I sent to my Southern California friend. For residents in the City of Santa Cruz, let me reiterate my suggestion that we should be trying to get that "Housing For People" initiative measure qualified for the city ballot next March! It would increase the "inclusionary" percentage, locally, meaning more affordable housing, despite what the state has been doing to reduce our affordable housing requirements. It would also "secure our right to vote on height."

If you care about affordable housing, and want to have more local control over new development, not less, this initiative measure is a step in the right direction!

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